At least 9 lawmakers from both parties sold banking stocks during the financial turmoil in March, disclosures that are already renewing calls for an outright ban of Congressional stock trading.
Notable traders include Rep. Josh Gottheimer (D-NJ), who sold Silicon Valley Bank stock after that bank had signaled deep trouble and one day before regulators seized the lender. There is also Rep. Jared Moskowitz (D-FL). An account linked to the freshman Congressman sold shares of Seacoast Banking Corporation (SBCF) just days before that stock tanked.
Gottheimer and Moskowitz deny any impropriety and the transactions appear to be perfectly allowed within current law. Nevertheless, advocates of a ban say these trades further undermine the public’s faith in Congress. The transactions have already spurred a demand for hearings on the issue.
“I’m not at all surprised,” said Rep. Abigail Spanberger (D-VA) of the disclosures. She is the author of a letter this week calling for a public discussion of the trades.
It’s become a familiar routine, Spanberger added in an interview this week, for a major news event to soon be followed by revelations of “buying or selling by members of Congress in a way that looks as though it’s connected.”
The Virginia lawmaker is the co-author with Rep. Chip Roy (R-TX) of a bill that would require members of Congress as well as their family members to put their investments into a qualified blind trust. They have introduced their legislation in each of the last three sessions of Congress without success so far.
One of the notable sponsors of her bill is Gottheimer, the lawmaker who disclosed his sale of Silicon Valley Bank stock. He has also disclosed a sale of Charles Schwab (SCHW) stock and a purchase of shares in Morgan Stanley (MS) during the turmoil.
A representative for Gottheimer, when asked about the Silicon Valley Bank trade, pointed to a 2022 statement where the lawmaker said he was in the process of setting up a blind trust and had already turned over investment decisions to a third party.
“I don’t believe Members of Congress, judges, or any government employee in a policy role, should be involved in the day-to-day trading of securities, including crypto currencies,” he said then.
A representative for Moskowitz didn’t respond to a request for comment but the lawmaker told The New York Times that the Seacoast trade took place in an account set up for his children and had been suggested by a financial adviser. He also maintains that the sale happened before a congressional briefing on the turmoil that he has previously discussed attending.
‘Broad, growing momentum’
There are at least 4 bills that have been introduced this Congress that would levy such a ban on lawmaker trading, including one unveiled last week called the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act.
That effort is being led by Sen. Jeff Merkley (D-OR) who said in a statement to Yahoo Finance that the reaction to last week’s unveiling has shown “broad, growing momentum” adding that “without action, we will only continue to hear of situations where lawmakers voted on bills while holding or trading stocks that could be affected.”
The current rules governing the trading of stocks by lawmakers were put in place when then-President Obama signed the STOCK Act of 2012. That legislation clarified that insider trading laws applied to lawmakers and also instituted the 45-day disclosure rule.
Calls for an outright ban have intensified in the years since after a series of scandals. The most infamous incident came in 2020 when then Sens. Kelly Loeffler (R-GA) and Sen. Richard Burr (R-NC) sold an array of stocks after a private briefing on COVID-19 but before the larger public was fully aware of the coming pandemic.
Burr faced a Justice Department investigation that eventually ended without charges and retired earlier this year while Loeffler lost her 2020 bid for election.
Some have even launched ETFs that currently allow traders to invest like their lawmakers in a bid to bring attention to the issue.
Congress seemed to be on the verge of taking action late last year before talks fell apart largely over the issue of whether to include Supreme Court justices in a ban.
“We’re not there just yet,” says Donald Sherman, a deputy director at the watchdog group the Citizens for Responsibility and Ethics in Washington, of the political will for ban but says the selling that took place during the banking turmoil offers another opportunity for advocates to press their case.
“Whether it’s the banking crisis scandal or the next one that will inevitably happen, eventually the problem will be too big, and the support for reform too strong, for leadership to continue to ignore.”
‘Do we want to take some action?’
The various new bills seeking an outright ban are from lawmakers who hail from both parties.
One from Sen. Josh Hawley (R-MO) is called the Preventing Elected Leaders from Owning Securities and Investments (PELOSI) Act to highlight the frequent trading activities of Paul Pelosi, the husband of Speaker Emerita Nancy Pelosi (D-CA).
Another effort comes from Rep. Angie Craig (D-MN) who has a bill called the Halt Unchecked Member Benefits with Lobbying Elimination (HUMBLE) Act.
Merkley’s bill has the support of 21 Democratic senators and bipartisan support in the House with Reps. Raja Krishnamoorthi (D-IL) and Michael Cloud (R-TX) pushing the effort there.
As for Spanberger’s efforts, her bill with Rep. Roy currently has 56 co-sponsors from both parties and no word yet on whether any hearing will be in the offing but she maintains that things are moving ever so slowly in her direction.
“Congress as an entity can make the choice: Do we want to keep having these embarrassing headlines that denigrate the public trust or do we want to take some action?” she asked.
